Endogenous technology switches in Dutch dairy farming under environmental restrictions

In this paper an applied general equilibrium (AGE) model written in mixed-c omplementarity format is used to analyse the effects of an increase in milk quota in the Netherlands when nitrogen emissions in agriculture are restri cted. The model combines the strengths of AGE models and mathematical progr amming models, which allows economy-wide policy analyses when technology sw itches are allowed. Results show that a welfare gain can be achieved by inc reasing milk quota while keeping nitrate (N) emissions in agriculture at th e same level. Under such a policy change inactive N-extensive technologies in dairy farming become active and (partly) replace N-intensive technologie s. Output in other agricultural industries decreases.